wrapping up

So it has been 3 months since I started this blog and it is now time to give a brief summary of what I have said and some small conclusions and opinions that I have come to.

I set off talking about how the discourse on climate change has become more relevant to us and how we make decisions on climate change mitigation in the context of abrupt climate changes and the economic rationale behind such action (or inaction). I have also set out to identify some of the impacts of abrupt climate change events to economic development.

I was fortunate (or unfortunate) to have had the occurrence of adverse weather conditions (such as Hurricane Sandy) and key climate policy decisions (extension of the Kyoto Protocol) being made during this period of time and I have tried to incorporate these factors into the discussion on abrupt climate change.

As the discussion unfolded, I realized that the recurring theme among all the different aspects of mitigating climate change was how the uncertainties were managed and how people made decisions based on their perception of these uncertainties and the degree to reach people were risk averse. I have only mentioned the reasons and considerations behind making policy decisions and have not explicitly talked about the costs and benefits involved in the process of mitigating climate change but I recognize this as a way to bring this project forward. I rounded up the discussion with two case studies; one for mitigating climate change and the other for identifying possible correlations between human development and climate change.

This experience has shown me that we continue to tread the line between inaction and taking action to combat climate change. This situation is made worse by contrasting opinions on climate change. My view on this concurs with the recent Global Risk 2013 report by the World Economic Forum (the section on economic and environmental resilience). Delaying action on climate change is not justified as costs (both economic and social) are rising. The line is only getting thinner the further we walk away from positive action on climate change mitigation. 

Case study: Tipping points, boundaries and thresholds?

At the beginning of this blog I mentioned that the earth has experienced an unprecedented warm 'stable' climate since the start of the Holocene about 10,000 years ago. However, some scientists have proposed that we are now entering a new geological epoch called the Anthropocene, where human influence on the Earth's climate has overtaken its natural variability.

In particular, a group of researchers believe that 'human activities have reached a level that could damage the systems that keep Earth in the desirable Holocene state'. Some of these changes might have irreversible effects and might be detrimental to human development. Rockström et. al. (2009) propose a framework of 'planetary boundaries' to help us maintain the Holocene state and mitigate global environmental change and climate change.

Source: Rockström et. al. 2009

The planetary boundaries that they propose are nine earth-system processes that are critical to human development and maintaining the Holocene state- climate change, the rate of biodiversity loss (terrestrial and marine), interference with the nitrogen and phosphorus cycles, stratospheric ozone depletion, ocean acidification, global freshwater use, change in land use, chemical pollution and atmospheric aerosol loading (shown in the diagram above). Out of these nine boundaries, Rockström et. al. (2009) proposes that 3 of these thresholds have already been transgressed (climate change, biodiversity loss and interference with the nitrogen cycle) and thus, this calls for stronger mitigation efforts to be put in place.

Assessing climate change, or global environmental change, using such a method has many weaknesses and they are outlined by Rockström et. al. (2009). However, this approach paints climate change in a new light. It shows us that climate change could be abrupt and could have catastrophic impacts. This calls for a different approach to mitigating climate change and in turn, changes the economics behind climate change policies. 

Tipping points, boundaries and thresholds will call for more immediate action then what has been previously proposed (i.e. carbon caps, CDMs etc). In my conversation with Bjørn Lomborg, he believes that if tipping points or boundaries have been reached, this will require more focus in geoengineering efforts and I am in agreement with his point. By establishing an agreement on where tipping points (or boundaries) are, and if they have been crossed, economic analysis of the costs and benefits of climate change mitigation will have a smaller discount factor and potential benefits will greatly outweigh the costs of mitigation. Hence, it will be easier to justify immediate action and less procrastination and debates.

However, setting and agreeing on a common set of boundaries (such as the initial planetary boundaries proposed by Rockström et. al. (2009) is still subject to many gaps and uncertainties. Once again, it seems like the debate on climate change mitigation, regardless of whether there is imminent danger, hinges on uncertainties and risk perceptions. This has been the talking point for this blog and I believe it is the crux in the management of environmental change and abrupt climate change. 

References:

Rockström et. al. (2009) 'A safe operating safe for humanity', Nature, 461, 472-475.

Case study: rise and fall of civilizations

After spending much of the time talking about the mechanisms of economic analysis in mitigating climate change (or abrupt climate change), I would like to give some examples of how environmental change has affected past human development. In particular, I would like to highlight the paper I recently read by Yancheva et. al 2007. 

Yancheva et. al 2007 presents 'the role of climate and environmental change in the success or failure of societies'. They propose that major changes in Chinese dynasties occurred when the East Asian winter monsoon was strong and that 'dynastic transitions tended to occur when the summer monsoon was weak and rainfall was reduced'. A reduction of rainfall led to phases of crop failure and famine which leads to uprisings and riots. They also link the phases in dynasties with the phases of collapse of the classic mayan civilisation (Fig. 1). 

Fig. 1: Paleoclimate records during the past 4,500 years in the context of major events in the cultural history of China (Yancheva et. al 2007).

The mechanism that they propose for abrupt climate change is the shifts in the inter-tropical convergence zone (ITCZ) which represents the band of rainfall in the tropics. When the ITCZ is displaced to the North, summer monsoons will strengthen and vice versa. On the topic of the ITCZ, Timmermann et. al. (2007) and Zhang and Delworth (2005) proposes that there is an intimate link between the strength of the thermohaline circulation in the Atlantic Ocean and the meridional position of the ITCZ. With a weakening of the thermohaline circulation, there will be less heat transported to the northern high latitudes and consequently, a southward flow of heat. This causes the ITCZ to migrate southwards.

A weakening of the thermohaline circulation might be due to several reasons but one widely cited cause of a slow down in the circulation is a massive and abrupt injection of freshwater into the Northern Atlantic. This mechanism has been widely accepted to be the cause of abrupt climate change events such as the Younger Dryas event and the 8.2 kyr cooling event. 

The Chinese and the Mayan were not the only civilizations affected by climate change. Other studies have shown that the Norse abruptly abandoned their settlements in Greenland during the little ice ages in the 14th and 19th century as well as the Akkadian empire in Mesopotamia 4,200 years ago. Putting this in the perspective of climate change today, it is highly likely that abrupt climate changes might occur as a weakening of the thermohaline circulation seems like a possibility in the future (e.g. due to the melting of ice sheets in Greenland). This might then have an impact on countries situated in the tropics and especially in countries where the people are heavily reliant on the patterns of precipitation for agricultural or farming purposes. For example, China is heavily dependent on the agricultural sector to support her growing population and economy and hence, will be subjected to the impacts of a migrating ITCZ. 

References:

Timmermann, A., Okumura, Y., An, S, I., Clement, A., Dong, B., Guilyardi, E., Hu, A., Jungclaus, J. H., Renold, M., Stocker, T. F., Stouffer, R J., Sutton, R., Xie, S. P. and Yin, J. (2007) ‘The influence of a weakening of the Atlantic meridional overturning circulation on ENSO’, Journal of Climate, 20, 4899-4919.

Yancheva, G., Nowaczyk, N. R., Mingram, J., Dulski, P., Schettler, G., Negendank, J. F. W., Liu, J., Sigman, D. M., Peterson, L.C. and Haug, G. H. (2007) ‘Influence of the intertropical convergence zone on the East Asian monsoon’, Nature, 445, 74-77.

Zhang, R. and Delworth, T. L. (2005) ‘Simulated Tropical Response to a substantial weakening of the Atlantic thermohaline Circulation’, Journal of Climate, 18, 1853-1860.

Review of a review

In my previous post I mentioned the Stern Review as a proponent for the kyoto protocol and an opponent to Bjørn Lomborg. However, this blog is aware of the many reviews of the review. One key factor that others have mentioned is that the review is 'not arbitrary and not balanced', as proposed by Zenghelis in the previous video.

Peter Lilley put forward that in general, the Stern Review accurately outlines the basic economic questions involved in global warming. Also, it makes an important contribution in selecting climate change policies with an eye to balancing economic priorities with environmental dangers. 

However, it is political in nature and has advocacy in purpose. For example, it emphasises studies and findings that are in support of its policy recommendations, while opposing views of the dangers of global warming are ignored. Furthermore, the Stern Review was published without an appraisal of methods and assumptions by independent outside experts.

On top of that, Lilley mentions that the Review proposes assumptions that produce very low discount rates relative to our global-warming analyses. If more conventional discount rates were used, the Review's dramatic results will no longer hold true. Hence, we see that we are back to a problem of using appropriate discount rates, and making hypotheses about the behaviour of human beings (i.e. risk aversion, patience etc.)

I believe that this problem of coming up with a solution for climate change is summed up nicely by the following video presentation by Gwyn Prins, a professor at the London School of Economics. He sums up problems faced by humans into two categories- 'tame' and 'wicked'. Tame problems are defined as problems which are bounded, where the more we learn about it, the more certain we are about its characteristics and potential solutions. Wicked problems on the other hand are open problems (such as climate change). Professor Prins is skeptical of human constructed policies to tackle climate change He believes that people are using a tame problem framework (where the more we learn, the more certain we are) to tackle a wicked problem. This is because 'we now know much more clearly about what we do not know'. The connections between human action and climate change are very complicated and he believes that there is a political hubris about climate change. Put in context, this suggests that people believe they can assign specific discount values in their analyses of climate change and proposals for policy solutions but these are often disputed, just as how Lilley has disputed with the Stern Review.

The Stern Review

After the discussion on risks, uncertainties and probabilities in the economics of climate change, I would like to come back to the Stern Review that was introduced at the beginning. The Stern Review on the Economics of Climate Change has been used as a basis for UK governments to move forward with climate policy. The review examines the evidence on the economic impacts of climate change and the economics of stabilising greenhouse gases in the atmosphere. It concludes that 'the benefits of strong, early action on climate change outweigh the costs' of inaction.

"The effects of our actions now on future changes in the climate have long lead times. What we do now can have only a limited effect on the climate over the next 40 or 50 years. On the other hand, what we do in the next 10 or 20 years can have a profound effect on the climate in the second half of this century and in the next"- Stern Review

It concludes that tackling climate change is the pro-growth strategy for the longer term, and it can be done in a way that does not cap the aspirations for growth of rich or poor countries. They estimate that the excess of benefits over costs, in net present value terms, from implementing strong policies would be in the order of $2.5 trillion. Furthermore, on the question of uncertainties, it mentions that uncertainty is an argument for a more, not less, demanding goal, due to the significant adverse effects of worst-case climate change scenarios. Hence, the earlier effective action is taken, the less costly it will be.

Therefore, we can see that in some ways the review agrees with the kyoto protocol in that governments should do more to reduce emissions but the review presents several key factors that are significantly different from the scientific and economic community. The most important factor that is different is the estimated costs and benefits. Where the review concludes that the benefits of abatement outweigh the costs (by using low discount rates), the IPCC assessments and other studies have concluded that benefits are not significantly different from costs.

At this point, I would like to introduce an evening presentation from Bjørn Lomborg and Dimitri Zenghelis at LSE.

We have previously heard from Bjørn Lomborg on his stance in mitigating climate change. Dimitri Zenghelis, who was head of the stern review team, presents his side of the argument and refutes some of the points made by Lomborg (start viewing from 0:50:50). Particularly, he highlights the occurrence of low probability events (such as abrupt and adverse climate change) and how people buy insurance as well as including uncertainties and discounting in climate change mitigation. He also shows us that it is inappropriate to use Lomborg's methodology to mitigate climate change.

In my opinion, this again highlights the importance of choosing suitable models for estimating economic impacts of climate change. Zenghelis also mentions the problem of getting 'locked in' to a high carbon infrastructure if we delay the creation of innovative markets that might induce greener technology. This shows the importance of looking beyond the current century and further into the future and I believe this is an important aspect to be considered in mitigating climate change. 

Kyoto Protocol- a facade?

An agreement has been reached to extend the Kyoto Treaty by 8 years to 2020, which hopefully by then, a more suitable and equitable Treaty can be drawn up and implemented. I would like to direct you to the video that can be found in that news article, where it shows Andy Atkins from Friends of the Earth. He claims that the current agreement reached at the UN conference is an 'empty deal'. This is because no new cuts have been mandated and the agreement was only an extension of the existing treaty (which already has severe limitations in reducing greenhouse gas emissions). The article mentions that one thing that came out of the talks was the recognition for a global effort to reduce greenhouse gas emissions but implementing an equitable and all-inclusive policy would be a 'monumentally difficult'.

Andy Atkins's comments are in some ways similar to his comments after the Durban climate talks in 2011. 

Interview with Andy Atkins (2011)

He says that there is a framework (or 'shell') where theoretically policies can be implemented to help developing countries reduce greenhouse gas emissions but the 'shell' is essentially empty. The problem faced at the Doha talks seems to be a continuation of this. Countries agree that developed nations should help developing countries to mitigate and adapt to the impacts of climate change. This effort has culminated in the establishment of the green climate fund this year. However, even though there is much hype about this, countries have refused to comment and promise any form of funds to reach the targeted level of investment by 2020. This is most likely due to the economic and political implications back at home (as explained in my previous post). Most notably, the US government has refused to promise any form of funds to help developing countries mitigate climate change impacts but President Obama has recently asked congress for $60bn for the damages caused by Hurricane Sandy.

In my opinion, this shows that the problem of mitigating climate change is very much politically and economically influenced. When political or economic concerns override the peripheral concern for the changing climate, there will be a stagnation of policy implementation (which is in many ways what we are experiencing at present). As such, there needs to be more 'action' and less 'talk' if we were to rein in the negative effects of climate change. 

The Kyoto Protocol

After having a brief look at how people assess risk and make decisions, we can extend the analogy covered in the previous post to our analysis of abrupt climate change. I will like to discuss this in terms of the Kyoto Protocol. 

The Kyoto Protocol was enacted to combat a persistent rise in greenhouse gas concentrations and global warming. It has led to a large increase in the efficiency of energy use and the development of alternative sources of energy. Governments have also tried to work out market inefficiencies and market failures by implementing emissions trading platforms and clean development mechanisms. 

Böhringer (2003) presents a review of the Kyoto protocol and his perspectives of what should be changed to the protocol and how it can be improved. He starts off with describing the problems with managing climate change and coming out with 'first-best','second-best' or 'third-best' policies. It comes as no surprise that one of the problems is that of uncertainties and the different risk perceptions of different countries. 

He defines mitigating global warming as a problem of provision of a global public good. This means that the benefits of mitigation are non-rivalry (the marginal cost of providing the good is zero) and non-excludable (others who do not pay for it are not excluded from the benefits). He acknowledges that due to the uncertainties involved in calculating the costs and benefits of abatement, this has delayed the progress in policy solutions. He mentions that 'together with [the] irreversibility of both [greenhouse gas] accumulation in the atmosphere and accumulation of capital investments, [uncertainties] imply a trade-off between the risk of premature abatement action and risk of delayed action.

In my opinion, this is reflective of the discussion on risk perceptions and disaster preparedness. Similar to the correlation that Miceli et al (2008) discovered between risk perception and disaster preparedness, if people were to perceive abrupt climate change as possible and most probable, they will likewise be more willing to invest in precautionary measures (such as investment in green technology and cutting back emissions). 

However, Böhringer also mentions that there is a problem of incentives and we are faced with a problem of 'tragedy of the commons'. Although all countries could be better of if they behaved cooperatively, each has an incentive to deviate from the Pareto-efficient outcome. This suggests that there might be less incentives for countries to bear the costs of abatement. One example is the withdrawal of Canada from the Kyoto Protocol as the country believes that it has been marginalised by undertaking abatement measures. Since the implementation of the policy, the greenhouse gas emission cuts have been more than replaced by the increase in emissions by non-participating countries. However, heavy costs are still imposed on participating countries which have led to one country, Canada, withdrawing form the program. Hence, this shows that it is important for policy actions to be more equitable and fair across countries. 

For more information about the Kyoto Protocol:
-visit the UNFCCC website


References:

Böhringer, C (2003) 'The Kyoto Protocol: A Review and Perspectives', ZEW Discussion Papers, No. 03-61, http://hdl.handle.net/10419/23995.

Why do people live in areas that are prone to adverse weather conditions?

One of the question that has been asked at the beginning of the debate on abrupt climate change and progressively more adverse weather conditions, is why do people choose to live in areas that are prone to catastrophic floods or annual Hurricanes/ Tornadoes. 

BBC (2012)

BBC Magazine posted an interesting article a few days ago asking the same questions. Classical economic models would predict that housing prices in these flood prone areas (or areas where previous floods have occured) would fall. Due to the intrinsic costs of living in these areas, demand for housing should be very low. However, reports have shown that adverse events do not have a long term impact on house pricing. People still choose to live in such areas, citing reasons such as: 'it will not happen to me', 'Having a river at the bottom of the garden was a big attraction, as I like to do a bit of fishing. [And] it felt like a nice community'. 

Miceli et al (2008) describes the perceptions of flood risks in an Alpine valley in Italy. The study conducted collected information on individuals and communities living in high risk areas in order to understand the risk perception of the people living in these areas, amongst other things. They find that people perceive risks both cognitively and affectively and their perception of risk correlates significantly with disaster preparedness. With higher perception of risks, there will be increased disaster preparedness, which provides an explanation to why people might still consider living in these areas prone to adverse conditions. Furthermore, it has also been found that it is often not simply a lack of awareness, but rather, assessments of local risk based on experience that people underestimate the impact of rare or extreme event and continue to live in these disaster prone areas (Burningham et al 2007). For example, the authors highlight that when people were made aware of the history of severe flooding in certain housing areas, the general response was that they believed that castratophic events (50 or 100 year floods) will not impact them. The study also points towards denial as a factor when home owners purchase properties that have had experiences of flooding. 

However, the above explanations only look at the perspective of the home owners. One should also consider the perspective from the building companies, town councils and government institutions. Some people might consider living in these areas prone to disasters not by choice but by circumstance. The BBC article mentions that local authorities like to redevelop old industrial and mill towns, which are often near rivers. Another BBC investigation in Wales shows that even with regulations set in place, local development authorities still approved plans to develop new housing projects on river flood plains. 

Hence, we can see that there are many reason that might explain the persistence of the people living in areas subjected to areas that are prone to disasters. One should consider the different perspectives in this problem. The demand for a good is the quantity that people are willing and able to purchase at the given price. If people are unable to purchase the goods, naturally there will be no demand for such goods. Therefore, in the face of higher probabilities of adverse weather conditions due to climate change, governments should take more initiative in planning and restricting home owners' ability to built houses in areas of high risks. 



References:

Burningham, K., Fielding, J. and Thrush, D. (2007) ''It'll never happen to me': understanding public awareness of local flood risk', Disasters, 32, 2, 216-238. 

Miceli, R., Sotgiu, I. and Settanni, M. (2008) 'Disaster preparedness and perception of flood risk: A study in an alpine valley in Italy',  Journal of Environmental Psychology, 28, 2, 164-173.